On March 6th The Chancellor of Exchequer, Jeremey Hunt, delivered the Spring Budget 2024 to Parliament, outlining what changes we can expect to see over the coming months from a financial point of view.
Whilst a number of changes were announced, we’re taking a look specifically at the proposed changes to Taxation and National Insurance. We explore the key points of each change and what it could mean for you.
Changes to National Insurance
As predicted, cuts to National Insurance were announced during the Spring Budget 2024.
Class 1 Changes
In the Autumn Statement, Class 1 NIC paid by those who are employed/paid through PAYE and earning between £12,750 and £50,270 was reduced from a rate of 12% to 10%. In the Spring Budget, it was announced that from 6th April 2024, the rate would be reduced by a further 2% to 8%. This could bring a maximum saving of £63 per month to employees.
Class 4 Changes
Self-employed people earning between £12,750 and £50,270 currently pay Class 4 National Insurance at a rate of 9%. Whilst it was expected that this would drop to 8% in April, it was announced that it will in fact be cut further to 6% from 6th April 2024.
For those currently paying at a rate of 9%, this means that for every £1,000 of profit in the main band, they could benefit from a tax saving of £30 – up to maximum of £1,131 per year.
Both of these changes will bring small changes to people on a personal finance level. However, businesses aren’t set to benefit from the changes as no changes to Employers NICs are to be introduced.
High Income Child Benefit Charge
Since 2013, a High Income Charge for Child Benefit in place. At the moment, those who earn over £50,000 are subjected to a charge resulting in a deduction to the amount of Child Benefit they receive. This appears as a 1% deduction for every £100 over the £50,000 income threshold. It means that when a person’s income reaches £60,000, they will no longer be entitled to Child Benefit.
However, The Chancellor announced that from 6 April 2024, the income threshold will increase to £60,000 and that the 1% charge will be applied to every £200 earnt over the threshold. This means that people will continue to be entitled to some amount of Child Benefit until they reach an income of £80,000.
Non-domicile status
The non-domicile tax status is set to be scrapped in the UK – a significant announcement made during the Spring Budget 2024. However, the existing tax regime is intended to be phased out over a number of years, rather than brought to an immediate halt.
Under the new rules, from April 2025, people who move to the UK from abroad will not have to pay tax on the money they earn whilst overseas for the first four years of doing so. After the four years, they will need to pay tax in the same way as UK residents if they continue to live in the UK.
Those who already have non-domicile tax status are being granted a two-year transition period before they have to pay tax in the same way as those without non-domicile status. The Chancellor said that these people will be encouraged to bring their foreign income/wealth into the UK.
Holiday Lettings
Draft legislation is yet to be published, but what we know so far is that From April 2025, the Furnished Holiday Lettings tax regime will be abolished. Under the current scheme, FHL benefit from a number of tax rules, which we expect will be removed.
These are:
- The entire finance costs, specifically mortgage interest, can be subtracted from FHL income.
- When selling an FHL, there might be eligibility for business asset disposal relief, leading to a 10% capital gains tax rate.
- Earnings from FHLs are considered relevant for pension purposes, enabling tax-advantaged pension contributions.
- Under the accruals basis, capital allowances for items like furniture and fixtures can be utilized against rental income.
- Under the cash basis, expenses for furniture and similar items are typically deductible as property business expenses.
Many questions remain unanswered, so we are keeping a close eye on what is being announced and eagerly await the legislation being published.
Stamp Duty
From June 1st 2024, the Multiple Dwelling Relief (MDR) will be abolished. At present, it allows a relief in the Stamp Duty regime meaning a reduction in the amount of Stamp Duty paid when two or more residential properties are purchased at the same time or as part of a linked transaction.
Capital Gains Tax
From April 6th 2024, the amount of Capital Gains Tax paid at the Higher rate for UK residential property disposals will be reduced from 28% to 24%. However, the lower rate will remain the same at 18%. This will bring significant savings to higher rate payers.
VAT
The threshold for which companies must register to charge and pay VAT is to increase from £85,000 to £90,000 from April 1, 2024. This means that once revenue within a 12-month period reaches £90,000, the business must legally become VAT registered.
National Living Wage
As previously announced, from April 1st 2024, the National Living Wage will increase by 9.8% and will also come into effect for those aged 21 and over.
Film Tax Credit
In the Spring Budget 2024, The Chancellor announced a new UK Independent Film Tax Credit – something the film industry will welcome due to their desire to receive more support from the UK government for a long time. The credit will have a headline rate of 53% for budgets up to £15million, which must exclude distribution and marketing costs.
Some rules we are aware of are:
- The company must have a UK director/writer/ or be certified as an official UK co-production
- Only productions after 1 April 2024 will be eligible
- Productions cannot claim separately under AVEC, 39% Animation, or the new Visual Effects tax relief if they are claiming this
Our Thoughts
Managing Partner, Sherad Dewedi shares his views on the changes announced in the Spring Budget 2024.
“We must be aware this Budget is likely to be the last before the next UK election, so there was no surprise that there was another cut to national insurance, despite calls for a cut to income tax. What seems to be being ignored is how employers continue to face significant increases in taxes and costs through increased corporation tax, minimum wage and whilst we welcome the benefits to employees, the lack of support in reducing Employers NI during such times feels unfair.
I do not believe people will see significant benefits of the increase in the VAT threshold of only £5,000. Nevertheless, it’s a step in the right direction.
In a landscape where taxes have increased to tackle our national debt and inflation, tax planning remains paramount and should not be ignored.”
